In his budget proposal Tuesday, New York Gov. Andrew Cuomo proposed a route for localities to lower pension costs.

“Local governments and school districts continue to struggle with pension costs,” Cuomo said. New York local pension costs for the Employee Retirement System and Police and Fire Retirement System rose to $2.2 billion in 2012 from $190 million in 2002, Cuomo said.

In March 2012 New York state government passed a Tier VI pension plan that reduced costs for localities. The new tier only affects newly hired employees.

“Tier VI has the bulk of the savings in the out years,” Cuomo said. “Local governments are pressured today.”

Cuomo said he was proposing a Tier VI Savings Finance Plan to bring some of the savings to localities in the near term. In this plan local governments and school districts would be given the option to use a long-term, stable pension rate contribution.

By using this rate in 2013-14, local contributions for the Employee Retirement System would decline to 12% from the 20.9% it would otherwise be. Local contributions for the Police and Fire Retirement System would decline to 18.5% from 28.9%. For the Teachers Retirement System they would decline to 12.5% from 16.5%.

If localities use this plan, their reductions in contributions in the short-term would be balanced by higher contributions further out.

Use of the plan would create major short-term savings for New York localities. For example, Cuomo said it would save Rochester 5.6% of its budget in the coming fiscal year.

Also in presenting his budget, Cuomo noted that the current anticipated budget gap was $1.3 billion, or 1.6% of estimated receipts. This compares a budget gap that was anticipated in January 2011 to be 12% of estimated receipts of the fiscal 2012 budget and was anticipated in January 2012 to be 4.2% of estimated receipts of the fiscal 2013 budget, Cuomo noted.

New York is required to approve a budget balanced on a cash basis. On Tuesday Cuomo proposed an array of steps to achieve the necessary $1.3 billion in savings.

Cuomo’s budget would yield a 1.6% increase in the operating budget to fiscal 2014 from fiscal 2013. It would lead to a 1.9% increase in all funds without anticipated Hurricane Sandy aid or payments from the federal Affordable Care Act. With these two things it would lead to a 5.2% increase.

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